Economic Analysis of Milk Markets in Rural India D. Naik; Odisha University of Agriculture and Technology,Bhubaneswar, Odisha ,India, Agricultural Economics, India Corresponding author email: [email protected] Abstract: The size class-I, size class-II and size class-III category of dairy farmers get profit over cost B recording Rs.4.10, Rs.4.05 and Rs.4.00 per litre respectively. However the return per litre of milk over actual cost (cost ‘C’) is highest in the size class-I categories of dairy farm owners recording Rs.2.85 as profit followed by size class-II with Rs.2.80 per litre) and size class-III with Rs.2.70 per litre) .Increase in price will not alone able to increase production, the factors like feeding, infrastructural facilities and timely market support may be crucial for raising the level of production The return per liter of milk over variable costs are highest in size class-I (Rs.6.75 per liter) followed by size class-II (Rs.6.70 per liter) and size class-III (Rs.6.55 per lite The production curve can be shifted upwards with improved production and market management practices. It is also important to reduce proportion of none descripts milch animals which drain the resources without contributing to production satisfactorily. Acknowledegment: I am thankful to international society of Agricultural Economics which encouraged me to write such paper. JEL Codes: M31, M31 #1144 Economic Analysis of Milk Markets in Rural India. (Abstract), The milk productivity in Orissa, a state in eastern region is lowest in india. It is mainly due to poor market support to the cow owners , mainly small and marginal dairy farmers who fail to get a fair return over the cost of production. Keeping in view the farmers need and prosperity in the dairy sector of Odisha , an attempt has been made to study the profitability in the marketing of milk in rural areas with the following twin objectives.(1) to estimate the cost of production per litre of milk and to compare it with market price.(2) to study the impact of price changes on milk production The field study was undertaken in two blocks i.e., Kamakhya Nagar and Gondia, selected on random from among 16 blocks of undivided Dhenkanal district. A cluster of villages in each block based on the concentration of dairy farms were also selected. The data were collected through the pre-tested questionnaires by personal contact during 2010-11. The return per litre of milk over variable cost is highest in the size class-I category of dairy farm (Rs. 6.75 per litre) followed by the size class-II (Rs.6.70 per litre) and size class-III (Rs.6.55 per litre). In the existing market price, the size class-I, size class-II and size class-III category of dairy farmers get profit over cost B recording Rs.4.10, Rs.4.05 and Rs.4.00 per litre respectively. However the return per litre of milk over actual cost (cost „C‟) is highest in the size class-I categories of dairy farm owners recording Rs.2.85 as profit followed by size class-II with Rs.2.80 per litre) and size class-III with Rs.2.70 per litre) The price elasticity of production of cow milk at the state level both in the short run and long run are found to be 0.552 and 0.551 respectively. It implies that one per cent increase in price of milk will tend to increase the production by 0.552 per cent in the short run and 0.551 per cent in the long run. This elasticity in the district like Dhenkanal, Kalahandi, Koraput, Sundargarh is found to be negative both in the short run as well as in the long run. It implies that the increase in price will not be able to increase production in these districts. However other factors like feeding, infrastructural facilities and timely market support may be crucial for raising the level of production in these districts The return per liter of milk over variable costs are highest in size class-I (Rs.6.75 per liter) followed by size class-II (Rs.6.70 per liter) and size class-III (Rs.6.55 per liter). However, all the categories of dairy farmers able to recover cost B and C at the prevailing farm gate price. This suggests the need for improving the market structure. A network of milk collection centers linked to decentralized storage facilities and processing plants and supported by efficient transport is essential. This will encourage dairy farmers to enhance their size of operation and will reduce milk spoilage and result in higher turnover. 1 The productivity of milk in Orissa at 0.45 kg per animal per day is abysmal. High levels of productivity achieved in some states like Punjab, Gujurat of north and western region. This indicates the untapped potential in Orissa. The production curve can be shifted upwards with improved production and market management practices. An important related issue in reducing the proportion of none descripts milch animals which drain the resources without contributing to production satisfactorily. 1. INTRODUCTION The Milk production in India has increased from 20 million tones to a level of 132 million tonnes during 1970 to 2012-13. The major milk producing states in India are Uttar Pradesh, Madhya Pradesh, Rajasthan, Punjab, West Bengal and Maharashtra. These states together contribute 53 percent of the country‟s total value of milk output. The share of Uttar Pradesh, Madhya Pradesh, Rajasthan, Punjab, West Bengal and Maharashtra are 17.59%, 6.67%, 10.54%, 7.37%, 3.66% and 6.59% respectively during 2012-13. Milk production in India differs from region to region. During the period of last 25 years, Northern region of the country shares 43% of the total milk production in India as compared to 23% in western region, 15% in southern region and 14% by eastern region. Various studies (Naik, D. in 1997 and Naik, D and D. Dwivedi in 2015) made in eastern India indicate that milk markets are unorganized and fully controlled by the intermediaries involved in the process of milk marketing. Even price is fixed in many places by the traders without making any cost study on milk. In late milk cooperatives have been formed at the state level including in some districts/ block with the intervention of the government. It helps in collecting the milk from the member farmers, process it and make it available with 2 urban consumers. Still traders and processers play a major role in milk marketing. Many times dairy farmers protest to get a remunerative price. In Eastern region, Odisha is one of the states, which contributes only 1.29 per cent of the total milk output of India during 2012-13. The milk productivity in the state stands today at 500 gms per day per animal. The milk yield per animal per day in different districts of Orissa varies from 0.162 kg (Kalahandi) to 0.935 kg (Puri), 0.925 (Malkanagiri) to 4.950 (Puri) and 0.665 kg (Malkanagiri) to 2.657 kg (Cuttack) respectively per indigenous cow, cross bred cow and buffalo. The per day milk yield in most of the districts are less than 0.350 kg per indigenous cow, less than 2.5 kg per crossbred cow and less than 2kg per buffalo. Another study made in eastern India ( Naik, D. in1997) This indicates that among three categories of the dairy farmers, the size class II categories of farmers( having 5 to 8 cows) are found to be operative at an increasing return to scale. The status of this dairy farm can be increased by an increasing level of resources. But the dairy farms grouped under size class I (1 to 4 cows) and III ( 9 and above) are found to be uneconomic indicating their operational level at decreasing return to scale. The study recommended for improving the quality of animals to make the dairy farms more cost effective as well as resource responsive compared to the existing farms. Dairy plays an important role not only in stabilizing the farmers income but it generates daily income to the farmers, since 85% of the states farmers are small and marginal in nature, the integration of dairy enterprise in their farming system will play an important role in the quantum of income as well as level of employment. 3 Higher milk yield should be associated with a dependable market support, which provides a remunerative price to the cow owners. Thus a dependable market support makes the enterprise sustainable. Profitability of any product depends more on the remunerativeness of the product price. Adoption of yield raising activities is feasible only when it becomes economically profitable. In the absence of a dependable market support the cow owners fail to receive a fair price which constrains them to provide yield raising feeds. Keeping in view the results of the earlier studies , Farmers need a change in diary sector in Odisha and thus an attempt has been made to study the profitability in the marketing of milk in rural areas with the following twin objectives. 1. To estimate the cost of production per litre of milk and to compare it with market price. 2. To study the impact of price changes on milk production. 2. METHODOLOGY The study was conducted in Odisha, a state in eastern India, where productivity of milk is less as compared to other regions, majority of the dairy farmers sell their milk to the traders ,farmers have no role in fixing price and few farmers operate through milk cooperatives .